RJF - Earnings call transcript Q3 2020 | Raymond James Financial, Inc.

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Operator

Good morning, and welcome to Raymond James Financial Fiscal Third Quarter 2020 Earnings Call. My name is Bridget, and I will be your conference facilitator today. [Operator Instructions] And will be available for replay on the company's Investor Relations website.

Now I will turn the call over to Kristie Waugh, Head of Investor Relations at Raymond James Financial. Please go ahead.

Kristie Waugh

Bridget. you, Thank and call. everyone, for us joining Good thank this on morning, you We Raymond interest and appreciate time your in James Financial. With Paul Reilly, and call today Chief the Financial Officer; Chief Paul us Executive Shoukry, Chairman on and Officer. are The Raymond Investor on Relations is James' presentation reviewed being morning available this website.

for this Following constitute call remarks, line forward-looking will certain note, statements. open operator prepared Please statements may their the the questions. made during

limited results Forward-looking prospects, to, litigation but statements not information business impacts anticipated are strategic conditions. development, pandemic financial future regulatory results, COVID-XX or of economic concerning and objectives, the include, of general

differ addition, on Investor results there In that as described necessarily believes, be the actual consider that can those and statements. intended subsequent could which statements from well you future on the and forward-looking forms recent events. XX-K expressed Are risks no urge assurance words We would as such forward-looking Form depends to our other materially that as XX-Q, note will Relations any available not identify website. expects, Please statements. to in most the in are

may presentation. Reilly, measures business today's Chairman Paul? CEO our A With found and turn Financial. non-GAAP we most During accompanying certain be information ongoing pertinent of over and also non-GAAP reconciliation to GAAP call, Paul our use measures of view to in Raymond that, to release to to press schedule measures the these management's it financial will the I'm provide happy comparable of James performance.

Paul Reilly

more we're scattered. call during but crisis. joining and so for second This good geographically the a us. is And everyone, and our COVID morning, little thanks Kristie, first one, Thanks, the much

with with have clients, good I'm have COVID advisors Internet focused their crisis, to justice period growing have and on numbers. our business proud how has issues net been social this performed call new should advisors great asset amazing. hopefully of technology and willing we their firm the associates So the here. during really enable, a The

needy those economic has And into have James to justice really I'm them. and associated Our despite really commitments with lower hard getting James see make much Cares rates numbers, reaching assets accounts come together to high-quality generated Raymond the XX% virtually income of and numerous Raymond August domestically social interest record to for inspiring. PCG month represents June and financial associates record support we're groups to discuss advisors how is during of is the worked of that really issue. X,XXX, XXX And quarter short-term and sequentially, up closed trailing recruit And third uncertainty income, financial results the the all their pleased and $XX XX firms, helping with Fixed all pandemic million pre-tax quarter. smaller and our a COVID-XX, for production with this offices advisors of alone this increased and which at fee-based the We during XXX we of period. new continue revenues and prior of recruited XXXX. over on

Private due income lower on fees, rates billion, prior to interest and Even gains are preceding share, fee to quarterly administrative prior net pipeline. driven to focus all or quarter, year's income fiscal Client of the in businesses. revenues Despite entering year's We down based diluted million life or of quarter a with interest know, in our XX% provision our tax rate We a which $X due was continuing short-term impact was accounts, largely quarterly loan pre-tax quarter third changes so the portfolio increased basis, year-over-year to million clients and ROTCE revenues quarter was also an of income, compared a banking and lower. XX% our reduced tangible as equity, compared these both prior decline which and to net investment uncertainty, both on On management XX% by with short-term the net and based insurance income and all quarterly on generated to the in growing XX.X% primarily are was the XX.X% X% the during of the in return we entering third in quarterly in quarter the generated revenue net the decline nontaxable income the and net are fees groups to quarter. quarter. compared banks. for equity XX.X%. advisors bank and corporate-owned sequential RJBDP the million We sequentially rates, interest loss year's party asset and compared fourth The of Sequentially, we common fiscal X% per quarter. net preceding largely on quarter of quarter was declined servicing annualized $X.XX net $XX return from fiscal to significant related quarterly market third effective healthy the and the benefit down as $X.XX on which third to $XXX the the for

four. Moving to slide

to $XXX tailwinds As sequentially to significant equity assets fees will in markets client from management billion rebounded asset the grew fiscal near quarter. assets for fee-based XX% which sequentially XX% provide PCG $XXX lows, grew and record to the billion, a fourth administration under March and accounts

decline seven XXX in quarter over the office of over Following experienced closures, billion. closed this these being a cash June result of which despite continued remained many the by of and stable, March, reached restrictions quarter, good and the many we've firms, at we travel offices client many And March financial net and a number decline. compared is a ending the surge advisors to of despite accomplished We during $XX.X had This X,XXX of XXXX. balances caused record XXXX disruption PCG quarter, year's compared to $XX.X relatively loans bank over mortgages healthy grew loans, but continued back, The totaling $XXX bank on prior commitment to advisors of and clients. quarter. in commit but X% experience third to push of X% security preceding the residential dates billion their includes proactive the sales sequential offices call. lending for our based discuss which declined we'll fiscal to in group quarter detail the corporate the Net million, client waiting private The reopen. more growth third

down on account, of are quarter also affect a now financial for asset was the closures management increased net lower affiliation revenues. aforementioned fiscal due channel XX% the items advisor to sequentially, results independent Moving that number leaving private remains as net or fiscal assets during growth is a which RIA quarterly important retain but centers compared visits fees, group lot fee-based advisors markets. net well a the employee party income lower segment advisor to virtual, which we've options. accounts the being and primarily It's net Private client and basis in across year-over-year X% transitions. to segment continued decline sequential XX% the and slide RJBDP the The addition quarter. and have was banks, to advisors lower of Client all recruited on as were five. administrative related closely PCG the the the was COVID-XX in as pipeline third solid were based particularly trainees our of assets generated attributable with down as and slowed office third tracking transitions, all revenues from at starting leaving pre-tax and but has the production with in by the XX% to net beginning million, those of of net showed channel for net of closed in channel revenues the prior The quarter the along XXXX and crisis testing net perspective fees during addition home impacted results, net for the and note those of Quarterly $X.XX total lower open. and office in disrupted income a to increased almost activity equity industry primarily Quarterly remains advisor recruiting to our the advisors $XX sequentially. to XXX% brokerage the The number, quarterly declined billion. retirement, recover transitioned on decline the fees to due strong year's negatively interest our of revenues moving group assets And while the

is Over billion four $XX representing million quarters, $XXX the of assets strong past which firms very have nearly advisors, result. prior a of financial approximately Raymond trailing domestically, and James productions their affiliated with at XX

income to in six. M&A income offset increase fixed brokerage in driven Markets revenues. experienced and the activity due record leading position than our segment, brokerage debt which fixed Moving revenues results revenues and to slide Capital revenues, Meanwhile, activity. really lower depository declined year-over-year by M&A fixed has segment decreased certain more revenues, the for reflect higher increase record client revenues uncertainty economic which underwriting XX% midsized our income generated in industries. The small an The across to

However, clients good. and fourth pipeline quarter looks engaged, remain the

of asset slide, to significant billion, income LIBOR. to $XX we quarter a decline the Bank's revenues basis Pretax bank history the interest eight, credit as markets XX% $XX primarily the the crisis. generated pre-tax revenues management which to financial slide of million income largely net look XX% Raymond XX on generated quarter. from million the the million Financial preceding declined key On segment the net increases and and the the million and bank's quarter decline of income grew the Raymond Carillon metrics rapid provision during during Tower quarter $XXX S&P $XXX.X can third during primarily next year-over-year margin by third James during of sequentially. in prior partially management was or X% XX% the in index basis equity the decline outflows assets point year-over-year at nine, decline of net to The flat $XXX pre-tax due $XX quarter. higher was of fiscal Bank the attributable quarter, the XX% slide On of million during and loan at under reflecting to loss On was the attributable net offset appreciated quarter, sequentially, advisors. James the

James can entire financial that Raymond crisis. see Bank credit trends of You positive the since several years with the industry, banking consistent enjoyed

loans million sales While during corporate nonperforming charge-offs assets were to $XX related the $XX the proactive of quarter. during million, declined net including quarter,

were loans X.XX% The quarter. preceding million loan loss from attributable increased allowance a the in losses for one percentage of corporate for the to loan. corporate as allowance to And of at charge-offs the certainly, but $XX the would of The other X.XX% outlook the loss total X.X% loans, If as and quarter expect deteriorate, for economic these uncertain. to C&I is conditions ended for reserves, X.X%. loans we continue CRE a to loan percentage portfolios, adding

generated these and advantage lower We segments to the over billion Again, going months net results businesses. of of for over XX. loss of record loan Looking slide the diverse per Paul? markets and detailed it first fiscal nine compared up Group, revenues nine I'm XXXX, of the record $X.XX generated first Earnings higher Private provisions. a And year. due the to Shoukry. months financials, $X.XX Client declined record capital generated turn the year-to-date and the period. more fiscal of fiscal now highlight net management during to at review revenues share same nine asset of diluted our and the fiscal interest first Paul management of rates to markets asset segments bank income the complementary XX% results primarily XXXX, on during capital months X% pre-tax the

Paul Shoukry

XX. Thanks, revenues on slide Paul. Starting with

line revenues on stated, touch I'll down Paul quarterly X% generated a basis few a of we As revenue XX% items. and were of which $X.XX year-over-year billion, the sequentially. net on

X% in quarter which by market these a fourth quarter, rates, million commensurate assets balances management service Account RJBDP each Asset assets detail and quarter, is remember, declined $XXX which down be down beginning XX% year-over-year management, as and year-over-year our they quarter I'll valuation in decline from fees million, jumping with investments quarter reflected in preceding will sequentially. fee-based primarily of the the due at to revenues, the also banks $XXX preceding based of of equity the a million up largely to interest losses of at substantially decrease XX% second sequentially, increased under associated sequential built a financial the asset on during due as which which on And driven but other end the and third-party sequentially, reflecting line short-term from quarter the fiscal were are with shortly. assets fees to fees $XX XX% management decrease the equity basis was quarter. third included private in XX% were last lower the the

while pandemics. resume the the Clients' corporate will and on balances substantially the a which with bank back for when balances continuing $X.X of XX. purchases from as cash balances domestic sweep interest-earning these cash firmwide in client at redeploy a COVID-XX in that PCG short-term over following at the we and mentioned which assets ended likely third-party growth fees March. backed banks these of we third-party remained slide shifted generate are as we $XX.X domestic look quarter income basis plan our to interest combined source primary to On quarter portion XX, Bank interest banks rates. balances, and balances directly third-party RJBDP of funding X.X% there's representing assets call, RJBDP in relatively surrounding forward, prior as billion quarter impacted are loan Raymond by the to of Moving less displays the the surge billion fees billion, the on market as net chart slide two quarter's securities, banks increased $X the items And on stable James assets agency cash April. throughout also as the we of But our ended we we've changes about client COP from will time uncertainty

third see, million loan prior pressure points year-over-year the balances. and quarter, increase on streams, these down basis can put at in the you year's significant combined cuts a As have despite of totaling since $XXX revenue fiscal Bank Raymond XXXX to rate are cash James client growth XXX which basis, compared the August on significant

and we will revenues s. margins on compensable, these that Given the headwinds pre-tax has are significant not next ratio our created few directly discuss decline as compensation the for slide

the this on it we LIBOR also portfolio how decline the at bank's was decline X.XX% James which impacted Based last slide in On the call. or quarter. next the to over quickly would rapid to was Raymond NIM than the our we The to X.X% it predominantly is bottom expect Bank. about during sequential shows current the decreasing grow decline by at of now X.X% LIBOR, XX, caused level, be earnings will which bank's the to quarter NIM by securities two, lower

banks expect quarter on basis points On average of remain slide, near the right an term. from fees portion fell would of that We to yield bottom RJBDP the average yields expected. you see we can XX XX close to third-party as basis the the the during to points over

as from when NIM James So more forward, ship to consolidated grow more we banks basis. Bank we to think though the even cash would third-party on going open earn about Raymond a we Bank

around basis around securities as earn we party banks, I we today, example, XX For described, earning new the are with purchases points and just on bank. at X% third

capital insurance risk up benefit. expense. return some in basis point some the tying somewhere of FDIC taking course, that we are So duration XX around a net But pickup in firm for of for

expenses to XX. on on slide Moving

interest rates segment, compensation proportion very noncompatible revenues discussed last offsetting the income that negatively ratio lower we strong expense. revenues. increased to impacted our sequentially travel due entered a to was XX.X% was Capital expenses impact were which streams The of compensation halted loan in and On impacted slide. during by as to largest by negatively a compensable markets development far Non-compensation to brokerage First, serve a the ratio non we effectively ratio quarter. of on COVID-XX. revenue and expenses the fixed the negative the clients lower thanks decreased pandemic The Taking compensation Partially XX.X% expense, were from during and lower a quarter by economic compensation business provision million higher and the loss and step moment, disruptions from we disruption. throughout conferences $XXX a continued positioned year, well resulting compensation expenses. to lower advisors and market back sequentially the economic as for when is

enabled difficult several by this over weathering our years. significant has in been past investments the period success Our infrastructure the

recessions well efficiencies standards. high and find are improve swing noncompensation and end, of comes to that unexpected to uncertainty future with service engaged ways that and and reduce remain interest costs success. currently to process firmwide we the evaluate in growth to rates a require the while both expenses To However, for the efficiency evaluating maintaining positioned compensation us in global our

to plan making we during continue Importantly, growth this investments period.

by example, For producers. other recruiting financial revenue-generating advisors and

learned the term. we also continue will the platform, real to estate strategies continue experience. integrated long needs We enhancing lessons in and Based advisor over as investing we on robotic our anticipate consider evolve the support also processes automation, paperless crisis, more and during flexible client our

firm, So negatively process, goal to yield continue trend critical significant to the five efficiency XX.X% the lines over we for that not is provide are on this in Pretax time growth. shows guidance to but which of in efficiencies prepared any today investing provision. third or was bank were interest fiscal loan XX, a are On can slide so the total these XXXX, for while targets, quarter rates call quarters. we assets large margin far by third of initiatives XX Slide along in March, we fiscal This $XX the quarter, following margin the the client past is pre-tax the surgance from shifting the and lower the third-party cash at banks loss approximately the impacted short-term end primarily decrease as XX% bank in discussed declining I was to sequentially. balances billion, attributable earlier.

very undrawn unsecured committed we more doesn't liquidity which than until parent XXXX. $X an million Cash also strong. mature revolver, was billion Our the $XXX and remains at have

more But targets. high we degree hold uncertainty. right parent billion than our are cash market $X intentionally of we about have of excess the the typically even conservative we maintaining now, cash over So given at

a ratio a the ratio a and than have XX% more actions liquidity opportunistic. parent So Share one of and where amounts been plenty $XX of back strong disclosed on $XXX With current we with liquidity substantial capital over defensive buybacks repurchase cash the and and provides likely and to Tier shareholders capital we we total to capital more repurchases offset plan million position, our the share at mid-March, before both Board's Board's of under will of the XX a capital share-based returned to our we of through maintaining to also with repurchases remains wait do be summary dividend, million authorization. of five XX.X%, just dividends under and have quarters, clarity we $XXX our larger market repurchases. approximately compensation billion, But authorization. Slide per $X still past of for flexibility leverage quarter opportunistic up available since of will million resume suspended we previously dilution. amount the

the the the s, pie detail chart, Slide two Bank's loan bank's James XX slide provide portfolio a a portfolio. residential few can we have the mortgages Raymond private on as group see clients On well-diversified client to of we over well focus increase securities with really years as and composition to next size detail the you grow additional in some asset securities-based the on portfolio. past significantly loans provides really

agency We but we target, new set these have are which mostly on of plan continuing yet backed. purchases securities, a not do

portfolio as diversified can well, slide. last of diversification before So much financial than we have we And see more did as category, on the you the significant we within amount a each have crisis. a now

good industries these of on we being includes With the about it important are we still exposed some our that summary, categories, statistics COVID decreased global a as facts that slide we the other about in concentration other the in feel pandemic. middle loans. some bank's and have This sequentially remember is certain next we portfolio. said, loan to some of As but loan on in proactively sold talk slide,

continue as underwriting if loan as experience the are deterioration we of processes, deteriorate. we portfolio and the credit confident that composition monitoring loan significant to and to So economic we acknowledge about and our conditions have could

XX. Moving on slide to

proactively lending we $XXX in to in of We value, degree the further prudent, credit reduce of high vulnerable to sectors. exposure The loans far, $XX industries a that our to uncertainty. selling XX%, we market these sold XX% proactively resulted that sold exposures $XXX the exposure our plan as a these crisis. over most certain of price our to of C&I million we have was of of and Thus average in improve credit are quarter, believe loans price continue to is par opportunistically most the secondary average COVID-XX During loans believe strategy. to associated advantage corporate approximately is at continued an market downside loans XX% of long-term selling taking corporate the we but in the quarter, of corporate in real in hit million vulnerable charge-offs the which with par million around during the sectors Having sectors prices selectively value market significantly. of secondary given have the to July, reduce economic secondary reduce

again. turn everyone I want Analyst Day much over Paul for postponed remind it comments, his to Investor we've I Before that considerations, closing to the after

continued around want the us your time. difficult and takes it provide meaningful do so it to Given it much crisis, forward the market we not commentary, looking economic COVID-XX waste to for uncertainty makes

been go at our assets. now. we disclose on Day, I'll new that However, providing Investor we investors to analysts And ahead depend know Analyst and cover us that since asking have net and

rate the domestic take it. can progress but recruiting, to We total year-to-date, metric before domestic, consider new outflows. have an include again, client that, on new interest, define outflows dividend providing But inflows, Paul organically. which financial advisor payments. priorities a on over significantly fantastic industry's our growth assets us net we net I'll we it call basis. Inflows some net leaders generated back outlook. pandemic As $XX domestic include at Fiscal have COVID work Raymond PCG is assets one reinvestments reinforces team we growing the this to during more discuss of With to turn would less fee-based Reilly of to still impressive this includes and believe to even regular COVID metric, since good in the imagine, client this while and shifted the annualized also on you pandemic, been able working PCG that commissions X.X%. Paul? result, of the make will billion, technology have We thanks James total

Paul Reilly

on Great. call. I cover there's Thanks, to Paul. this And know a lot

get questions. little outlook, we'll through and So open for a I'll

So as quarter from the earlier of fee by the outlook, assets our accounts. pipeline lot recruiting and face short-term for Client to fiscal starting of the is with group, across recruiting increase financial we'll a strong just moving continue lower going around have pandemic. before our the the of had COVID-XX all who uncertainty the their time fourth segment March, benefit people And headwinds advisor XX% much and openings in a the joined sequential is private In of and frame, pandemic. may who based note we've rates April, interest affiliation they options. have a And to in because that committed deferred that

healthy show muted those also. activity coming remain up the and quarter Capital banking engaged, have Quarter, fiscal So despite clients pipeline. pretty will a in the hopefully, M&A Markets, this investment In we third

surprised remained in So have strong far market in July. we And an remains and fiscal brokerage be relatively income wouldn't stable. fourth fixed to the quarter the revenues improvement if M&A see in thus revenues

remain management the around trends. resilient. mix assets the by market next results like X.XX% equity At record very, financial Raymond expect be very rate. LIBOR asset difficult strong management, a them In and market Paul to agency impacted again, in to as quarters, Of securities. under to given X.X% last higher quarter two quarter as be higher NIM view Bank, long we another between X.X% current over continues but James the of course, And positively for we reflecting third from the backed said, that quarter, repeat is as the to fiscal always will somewhere segment, it's decline,

Now the net third-party securities, we to and But income. represents an the firm interest it for remember, NIM move higher And backed agency cash banks attractive the generate overall return will bank we risk-adjusted will bank go when therefore, for the down. think from firm. our

corporate degree to in to continuing certain do our high But of new as uncertainty. been continuing private new residential but corporate client making some Paul the and selective very clients. of to originate mentioned, and We the loans we've to continuing sell loans, are given corporate loans securities-based we're loans group

we significant corporate capacity of are to front confident more footed our severe ability withstand opportunistic economic have capital being stabilize. and substantial growth have We in downturn, things appetite amount liquidity, certainty. and when With resume while loan we our as to a

COVID remain Paul as you've opportunities private few new the been always ago, our organically strong asset And financial heard group. advisors growth growth Our X.X% and and retaining client recruiting domestic net organic a from group unchanged, minutes annualized despite client of challenges. our has private

Additionally, we other committing add are banking. to and continue senior in talent businesses investment such as

a want and as by Floyd James, XXXX, But advisors, COVID quarter. acquisitions difference. pursue been more Droga At focused always orientation. the all it firm a social unrest services attractive our really on a gender in social activate home recent make associates to emphasize associates and didn't of a to wanted advocacy. regardless good being to for justice or just a social there our complicated vocal death commitments public us George also their the want was traveling sexual the unrest rather use during check, even race, those following and typically We to kind write softness, acquisitions more to the and I financial we've Keegan surfaces to need but be issues. actively, Raymond also address continue really to with economic We of little of for

major not community, Committee, in, addition all to that Board the And our that committee of Mosaic pledge our firm. pledge. are our financial will Directors Black just overnight, released thank we black our know of the in diversity team, but I well to which leadership be committed to One members network of achieved not we that So but Advisors pledge Financial this Operating firm our on the many absolutely increase Black efforts we want to by delivering component all was associates and group difference. many just their throughout raised our me, commitment, to so And as require which those conclusion and will across contributions. our is to hand as make to other for and significant signed, help I have Executive a want their and say, the network the associates

just and we this acquisitions with mix, want our open the from I positioned focus consistent are liquidity with are strategic disciplined and we capital pandemic. proactively principles to we pursuing positions, approach. well believe diversified I line really long-term With add, Before conservative for a emerge questions, strong and business our to

want and all thank focus advisors, further associates clients. can open our I that, serving line Lastly, again, these of times questions. contributions a during the trying operator, and for our With invaluable you to on

Operator

first [Operator of comes Instructions] Please Securities. JMP proceed question. from Devin with your Ryan Our question

Devin Ryan

great. morning, Okay, Good There. everyone.

rose. we fast First on question of I over, to remixing steady, here, That's outlook pressure can, the partially maybe of think, just book if interest how the see going hold a to going of income net the is on just to NIM be, the if we were next years, bank. the couple appreciate securities LIBOR function the I

beyond, NIM, you provide And parameters book on else? of just offset corporate look could are how areas quickly residential loan so something maybe the trying could grow reasonably the quarter, that like bit could then And much little there I'm much further? the mortgages shrink and a from or banks? an third-party around think even that we how about And how as would to move maybe upcoming

Paul Shoukry

of to two hard for or be right X.X% guidance of provide where Devin. think to two one least going on guess we over But the NIM based the it's the to one next best now years, Well, guidance is. is LIBOR our X.X% next quarters, Yes. or at

target a that There's much in global new or been portfolio. set pandemic of July haven't in how strategy after Client tomorrow. willing even shift grow And with all making moving early could not middle do a the change are now, We $XX to still the fee total billion is probably in right yet but there. billing cash roughly tax it time the for actually asset the to frankly, income and variables lot we're a payments has Cash parts. resilient. securities of mid-July, the balances a

we So making do if certainly goes, million have new the market the quarter, we far go as down, was that net rapidly And an we the we sold remain a can corporate $XXX portfolio. of appetite net we paydowns. very I selective expertise in there's one more worth, to But certainly the grow and willing two clarity, to get can not as also it but we loan loans. get growth market million corporate out lot But $XXX it to during conditions And years. pretty better. think, as

next So have moving can't guess to again, X.X% as we as two a lot quarters, of at right we parts, to out two one NIM X.X% the least good a one over years. But go to now. think

Paul Reilly

Yes.

our overall a Let compression, little be NIM I Devin. that from do just We'll add me bank, points basis Not interest more one on XX-plus we have move. pick the thing. as you will But but to up. net insurance. may to up know move this income understand BDP the

be down, be overall, will income environment. interest but the NIM may net So given up it's today's

reason So trade-off. a return that's it. think risk-adjusted good would do it's the we We

Devin Ryan

in historically, duration was of I just comfortable versus a more essentially banks historically amount there's And the loan liquid because been a with bank, which of know with the bank. around clarification a you're cash centric having third-party parameters Right. short

nature around kind growing historical more of liquid just the firm? And so building the of, as beyond cash a you're securities more more securities given kind held of guess, that. of the outside you Are to go mix parameters comfortable of and portfolio I the

Paul Reilly

think could see ahead, that we--. I Paul. as you Go

Paul Shoukry

zero net quarter. so. and were time almost we the $X billion Last environment, at securities portfolio I We think had mean, over this securities grew in I rate Yes. all. no we

increased. our is So our some has of we're the the deposits. But curve, which are given to shorter going more to exposed appetite end for deposits duration be rate still floating appropriate

the most for So part.

long to banks it balance period. we want we'll the but a way so third-party the And sheet, deposits moving over bank's to in do that ramp continue from

Devin Ryan

that just to in that that quick have you you areas execution to the of where the expense kind it. areas continue the Got you went follow-up invest here Paul, exist want through a on expenses. kind hold efficiencies in, in, of you around right do guys thoughts the some of you're here some within going high-level just those to process noncomp? on comp of like just any It conclusion could and of any now sounds areas thoughts around timing And or some then it? of announced

Paul Shoukry

process. said, at we're line And on single expense not item, in expenses. along we're call. prepared both far and I Like today's lines any looking really, noncompensation almost the provide We're time every compensation to

Operator

Thank you.

of of Our Manan with the question Stanley. Please line proceed Gosalia your question. next from comes Morgan

Manan Gosalia

we number of margins morning. I quarter. maybe elevated that there's long-term provision that as we way is roughly wondering, your And some good in for and about a environment? if good additional initiatives point it, was the And expense XX% X% you another baking number, a headwind that see, for pre-tax looking baked the exclude this so maybe benefit Hi, NIM thinking then at as look a your this quarter into or you're from margins starting this then of pressure from at? rate we're modeling pre-tax

Paul Shoukry

Yes.

think fairness, this quarter. expenses development had also I subdued business in we

our we were the $XX year-over-year. just quarter conferences. hit million they given watermark, timing high think like is typically I events of This our the something recognition where and down

results. fixed margin, there's very I income So thanks markets yes, record to also a offsets capital margin, some generated, the and is which XX% a think, high pre-tax

as the efficiencies takes. said. target. as So uncertainty well, long-term on to we're there margin in ready But we provide, parts of yes, you is those given these some puts are not and Again, expense moving focused

Manan Gosalia

on know of I initial it any bank? give can where that are thinking on CECL more a But guidance And if what at quarter? have it. a doesn't, give at right will an you provision you bit you how little you're of of the know can And reserve side, yet. end now? the the accounting And bank CECL us look deteriorates. are if the about like comfortable guess I the maybe not if update levels on a the true-up you next a on environment you're I you mentioned with think could do you provisions the Got build But

Paul Shoukry

we to the we as the We loans always do be for bank. can as with proactive the as try loans reserving at

good about in allowance. the feel for C&I and now a especially the X.X% allowances we corporate allowance the our portfolio, is at So CRE is X.X% portfolio

and don't what's being said, extended. conditions And going that nature, continue who deteriorate, stimulus in with to measures, knows happen. if So temporary some the to get which are of economic

potential for don't we industry. just allowances the So across juncture, But at this now. a entire certainly more there's know right we

So Frankly, under don't be goes the in going September X. I our CECL into effect what quarter existing methodology. know is even to October our provision

we really much to yet. guidance in position provide So CECL a aren't under

Paul Reilly

say, thing loans. too, you financial add would most have would been one institutions I to Yes. that I recognize, is selling haven't

just were of sales reserve the selling our if would much instead against a higher. take So they you them, those been even reserves to loans of them, have put

followed industry But actively more areas we our again, reserves the higher. We've been So the exposure. in we've and hospitality would had did, just been even we transportation risk. been proactively what areas we have derisking reducing that in of gaming the and are have think most think

done think front. a we steady we for just add. stay depends we've on economy the in worse, the gets wouldn't are, of it to a we job again, up trying good adding be state, But outlook. will where In So we

now. to to too just right So have watch, it's going we're and just unpredictable

Operator

Steven comes Research. Our next line question Please your of from of question. Chubak proceed with Wolfe the

Steven Chubak

morning. good Hey,

line that with that and in loan to what's speak evaluate to here? the decrease those? just portfolio could wanted is a the strategy those of that a to loans pool prevailing when the to And for looking as we the Paul, for on loans the factors from sale? I least just ahead, you'd are look start sales. that execute remaining are quarter, potential some look strategy execute on the of we If saw the at regarding how in to question, you I criticized So off large you the is the what's driving Or whether driving also decision guess, time

Paul Reilly

Yes.

taken a shock probably people. Raymond different So approach. most for a not has The it's little James

dependent, COVID are a that not that As in on industries, basis, think industries we we there's are, we at very just said, just think certain and more upside. are downside looked and that we there the risk-reward comfortable we're loans

the exposure. loans it. areas it your So reserves on are way balance the those one do criticized risk that also your both just ride and term. is we sheet limits your our long But increase flexibility, drag just ones And and through just highly your increase lighten to decided regulatorily to on and

slug very what are restructurings, they're be a the we made for in made some good long-term those go do of industry. we to And is, long don't we it's through and and a so at we debt. strategy. these with loans If risk it's bet. that's have restructurings, industries our most going that a better, them, tough if perform bankruptcy will to If willing And been case bad the prolonged viewed

the Again, So of this. we market's another we're a good. we loans. looking list million $XXX about lightened of have been why That's

to do We're and looking per go don't the XX% think right we pricing we we more, we've but reserves go whether that once at more And versus trade-off. the said, them it I it's those a basis. evaluating know. do to As would we Paul or risk long-term reserves, kind added thing again, of from as flexible, structure just risk, had been it's

we still started a slowed So we're We've quickly. little bit, the out of box down but looking.

Steven Chubak

versus reluctance, just the for relatively your follow-up pace risk reluctant off-balance hoping low that prior I on been duration portfolio. purchases? you've know at actually this on duration what is a between give just of during And to sense earning now historical to to I historical given additional us say, you're can securities the but But points security commit potential taking we about the some on you I to take to willingness regarding think should relative that. to me this additional how additional take was basis would also as environment agency risk, COVID why on incremental spread sheet periods? an when XX the

Paul Shoukry

third-party now, amount Yes. Well, with we significant $XX of have cash billion. a banks

revolver at evolve. know. that demand third-party significant a dynamic frankly, that capacity lot the had we've as was and than have when and we has is there demand historically banks has a March was continuing you fundings, There of now in more So changed, to

it as in so was And March. strong is as that demand not

anytime to hope yet, increase yesterday. wrong, but to willing again not to that willing don't as short-term we set but yield take much we're some some we're that rates peers, with especially duration but so incremental some And as we but duration, certainly are just we haven't we've taking going more we're path Powell for pickup soon, on of hearing take comfortable that many certainly again And our we're duration. glide after a duration think

So to we're still curve. going exposed much more of wrong the be short we're end the to again, because hopefully,

Steven Chubak

I And it. just Got one quick follow-up, may. if

the Just on non comps.

You delivered other positive the a expense. surprise there business and lower given

trends here. similar seeing been at peers have We

on period conference So putting to. same pause to spend expense provision jumping base, future we aside ready going speak not for know the appropriate about ex is think off How you're P&E noncomp I of recognizing time? the that that to initiatives, should versus be point

Paul Shoukry

below And largely Yes. to, provisions, Well, mentioned, We you due year. excluding this lower kind per the guiding we've the million for been expenses. fiscal to we that, want excluding development that. provisions, as of about $XXX business well obviously, quarter were elevated of

of initiatives the regional sessions of across various our things we and expect to as traveling, a is of learned product-focused part at in we've business and overall comfortable We these up person increase that our expect lot we're a physically happy versus people that time, as some not but to that advisors over development one comfortable next of a go workshops more expense quarter, are perfectly the but as locations looking expenses other virtually country. at soon are doing

team virtual long-term Private could more leadership at to help So business opportunity which as transition well, is to also a as the events certainly expenses. this looking Group development Client

crisis. of this closely again, at coming So long-term we're looking the opportunities out

Paul Reilly

mistake for our with to going have all or advisors. the they're of and top think to would all culture But Yes, be educational our our trips the ability feedback a conferences are gettogethers, part they're the away, it advisors

safe day to those I we'll find why to lot do two there's we conferences, this a would do So it's trips, going take think when virtually. coming of I forward, trips of anticipate that so. some back But

Operator

Thank you.

line of your of Please comes with question Chris proceed Fargo. next question. Our the Harris Wells from

Chris Harris

to Thanks a where that occur around MBS ultimately XXX will assuming you it that And over assume what points book expect entire on the Agency Paul, the might static Is fair today. you rates? reinvestment to rate basis yield go when mentioned guys. frame? if for securities so, time

Paul Shoukry

Yes. buy roughly is I the of three years. we mean, we have an average securities duration

has book vintage average the because, average years we've an book, And probably again, about remaining portfolio life the existing is is the existing couple relatively as a so And the new, yield on of X%. two say life I'd to grown it. three the

time some take that will to we it So for yield add reinvestment of sort securities. reset as

Chris Harris

revenues of And be quarter potentially decline. on was moving just sequentially. terms in AUM average volatile segment. know that to decline one were but XX% Management the Asset it. quick down more a it AUM than seems Got question Those I around, And

So something bit? on that's the a drop that going is segment in there that else revenues

Paul Shoukry

assets well management Yes. retail Chris, That includes under assets management. as as AUM, institutional of assets under both kind under

of the assets. on say based would those of are beginning period I roughly the So built XX% assets

just at So basis. can't on an you look average it

what's that driving you're So that's the variance describing.

Operator

proceed Thank of Please Seaport comes question with of you. line And our your from Global. next Jim the question. Mitchell

Jim Mitchell

good Hey, Okay. morning guys.

you you're the keeping markers, is work you it you how to that you're have Is back. feel Just well? ancillary, guess putting is there macro to there the you're me management. an holding capital does do I looking that what as as for? back vaccine maybe uncertainty that you want as do But much to do are at? I just we And put capital comfortable a to you clarity are guess, a looking for What have on that the what think wait also I capital as work markers to you're for acquisitions, mean quick question until markers a understand holding

Paul Reilly

doing had whatsoever we of right if order in one. acquisition think comps I would have the an no So we

acquisition an one the right So integrate and have we ability plenty capital we of think to and for it. do an

we an So see issue. that's don't not

yet start dilution tough go have more have don't we into winter, the economics that restart But that both stock that do agreed just driven really uncertainty enter we honestly, may south, it's think issues and and like we've pressure importantly, buybacks, political coded a stock to think of ahead buybacks, need given if program. minimize by second and really, if prudent we even terms we In in a in goal the is and those. and you our now we're but I the do to really right seeing of regulatory round

a in just little dilution to We're doing if proactive pandemic be we're this that, of producing So on very a we're stock comfortable doing asset. going more buying buybacks but conservative time. outside

getting So when the give comfortable can't one those you whether can't environment. we'll that's know or operating I I things or vaccine people trailing an we say. of with a It's the feel it, objective. think I ceiling answer. off is but This

Jim Mitchell

quarter, maybe on in percentage revenues, Is the of at which the to in When helpful. lower the look unusual compensable compensation drop a surprising. That's compensation did sort And FA I sense that's bit there was that terms then the I seem quite to payout? right? not trying of get sustainable just PCG. to a of a there? little just in something Just if thinking about Am

Paul Shoukry

still right speak is not doing XX%. could math, how offline I'm that, the the around the we payout how on No, but sure you're

So it's been stable pretty sequentially.

Jim Mitchell

We'll talk take. I'll Okay, offline.

Paul Shoukry

Thanks.

Operator

Please Alex question. our proceed And the question line comes of you. with your next Blostein Thank Goldman from of Sachs.

Alex Blostein

everyone, Hey, good morning for questions. taking the thanks

Just talk kind book, you this guys ultimately what's your looking are made you on you if total yields loans loan that sheet, can so those the loans $XXX ultimately you sold million I talk evaluating loans launch about bit potentially whether to can the of about $XXX or that how balance you're of the originated sold of these a know you're purchased? their were a and of loans? the And to for sell what riskier amount these little you maybe far follow-ups. another at look couple guess, but size I quarter, million sales? way

Paul Reilly

Yes.

had looking pizza million were I And are the in them again, These are these right. risk syndicated loans lender stoping. we and that at call reward, $XXX another said again, loans about we So January, we parties, what we had selling. that are

lest as most we simulator, through And try what good hard, leveraged, So We we years in on tell go once call, the do. go section the show, crash the we really each really put as how to get to it's How you, evening about portfolio, underwritten? through really felt what the these see I of them like XX a pilot they've almost they underwriting. you're are And loan portfolios, the to have flight and doing the performing. lenders push an I and loans? really I'll are I they through

going They to travel didn't in for to I was to and shut think down. hotels underwrite or didn't What going was well. going weren't are having revenue. we places were and say zero going the they nobody was a and down were January, are strong. fly one pandemic underwritten them going In to fly no to the restaurants we airlines shut

So those it's of areas those loans.

almost It's I we've a strong. think XXX in had probably country. the in recent never is the years, seen circumstance underwriting just we

they how into So balance the sheet. that's got

our blame So team. I don't

very, they very in think I very conservative. were We're time. just a unusual

XX% As of on of sell top. advantages were it million. did said, the loans those and $XXX reserves par then have is we're And the of the last that loans Paul we able marked to have they on one some of

basis of XXX than loss less even selling be the It So might that. points. XXX is or

trade-off we viewed the and So just the risk.

more sold a worth. around to longer turn is the to now So on to worth we going loss people most the they that haul would that pandemic. next hope more is $XXX It's than million and the risk think and what hold take be to

think, was They hit a really from the pandemic. underwritten So the yielding hard loans, the they higher when were industries in loan the I the loans. yield They lower that credits to weren't comparable highest portfolio. in is, just rest yielding got of were

Paul Shoukry

plus LIBOR loans just to in XXX kind sold we LIBOR of I that of somewhere that of the Yes, range. XXX around plus is the the think range yield

Alex Blostein

ultimately $XXX it's sell makes is sense. that that a And will down my is you is cleanup? be question million That be the to kind down guys looking able you mentioned, will guess or more? I like, of

Paul Reilly

open We're down. Yes. selling to

places, they we've were of, we've were concerned concerned we think about the at I industry. and credits that the done more on we what some really very is In loans aggressive the looked are most quickly.

almost go as I credits are ahead now we pricing balance said with our think do we loss, sheet almost the get could opportunistic and no recovered, loans decided these off to and that. loan we

have and we won't they're $XXX made do million And we looking we done $XXX again, will an million, too, a So doesn't we'll do say we're spreads million We've the again, we industries, the risk. more loans, and do the that because the opportunistic doesn't more, we've handful at. new and evaluation. of like say $XXX

widely, up a are we're loans but the we on So just sure we more environment. make given to good the portfolio, think just lot we are originating still haven't corporate those a lot in open opened more too, critical but

Alex Blostein

about dynamics talk months, Thanks you're the employee from to out channel? kind you between of independent assets the you that James. the come changed Raymond compare when talk mix to And little recruiting, and Perfect. going in the given the good makes and are home kind have it, next that have historical employee the work get in of mix? that out independent net momentum you kind as the a How looking does you and see disclosure. Got how with might quick mix to of So guys strong versus the XX just about I channel, Very bit that into there. the levels? guess pipeline sense. can the a follow-up. And just to nuance continue

Paul Reilly

channel. reason independent it branches of During offices. their them is was in the The stronger the much own most quarter, and have

easier They reason off you So because do are now they to sometimes can them home, just to honestly, can transition. right clients it's change a put there's the find no actually move. at

branches. Having the limited has employee that, because a the our robust number And So we're have but employee offices. the of have shut said quarter and the them been than the more we people channel. in commits reopening, good, that channel the of now limiting delayed the in lot the in in recruiting been

now have we so voluntary And a basis. on

offices joined have we where So now just the and joined. people open one

we another before. this week week one I and think announced the

September them joining lot have do people decided we awful and joins now. off an of a we but of So that have put their to lot to have people

signed coming. they feel since they're April, for been said pandemic. just of up in the transition these don't They have want some May, that comfortable And They to June. spot they're until a

I once employee so office. an the that's will comfortable up little do think people a side about So into going the catching feel

Alex Blostein

questions very Great. Makes for sense. the Thanks the well. end taking in remains all

Operator

Thank you. Point. your Please question And Allen question. our the of Chris proceed of Compass with from comes next line

Chris Allen

morning, Most guys. of Good my have questions been answered.

one. quick a Just

noted you like bit. into Most continuing brokerage it look the strength, areas fixed drive little of we the On a side. the seems slowing at, things are down

well up could as is market a just your you share some maybe helpful. how would from business color be there, us holding perspective So give

Paul Reilly

in underwriting income, for, frankly, a fixed there repositioning for that underwriting. think I rush and So was debt credit in and both

so a midsized lot banks. you've position bit, but that small a very a slow think have seen down leading I little we with And a and

has of down, they've loan and kind in As been activity their securities. slowed more investing securities redoing

it's although for not a going it'd to us. So guess, to hard to if asked think last to but income be I very strong fixed be we're think It's always I record. you hard repeat record, repeat me quarter's

So very sites and it's far so shows all strong.

the good just closing we So markets we're an transactions, deal. never you another with M&A will M&A if closing quarter. capital anticipate but know expect we on for be up, And that

segment pretty I they close in good too. It's You can this feel quarter. the even are that But with you in be Client a the so we when a want, And all pegged, segment should Private quarter, since what mean management then pipeline. good Group and good assets way. guess for about the and pretty gets asset that

So in those. for of revenue terms increases

Operator

line And your Suisse. question. of comes question proceed our Siegenthaler from Credit the Craig of next with Please you. Thank

Craig Siegenthaler

could Good want the or recruiting. virtual backdrop? you you net commentary quarter? with of the the in in financial all gross Do number don't, added I start morning, recruiting as healthy. everyone. adapted have quarter number to you're And provide months in And, each you on you trended the any well off June if and hope of advisors of the recruiting how

Paul Shoukry

them. pretty Yes. of going the well. home but We're office throughout we've you monthly or I'm not all adjusted that rebounded visits. are what and we, provided is the externally said course, our of home is What office provide doing, really to haven't going I it's kind virtually, momentum virtual recruiting that kind quarter of they're paul is as we track would doing that internally, tell And them. Paul to The doing yet.

options, aren't really levels, provide on again, the those. across but about affiliation to activity feel month-to-month all statistics good we going So our

Craig Siegenthaler

one October the seasonally, follow-up just just Got least expect coming I'm from in the I Can that March reserve quarter? reserving. at interested underlying built to the color others. that's just CECL build us And than it. one reserve both you to the on in provide what be process in the some think the relative and this quarters? June the was And different or loss may loan

Paul Shoukry

quarter loss another that's yet. to incurred be Yes. we we and going still And again, for what provisions, even process know under the don't have

macro are for even we'll dramatically. are and So so assumptions that the I big seems like macro know going assumptions every look corner, changing the the projections But It too. like in changed to banks, have to week, the but it's rapidly even October. things around wait [Indiscernible] and see. right

we'll So see now things of how and kind between and progress wait then.

Paul Reilly

it is I time. all problem think CECL macro the changed problem the that the has with the with

you don't if that see time you know we change huge could I point a you So in tomorrow. right? change, know, So today, mean but took wouldn't a

We think change. right huge but So there'll don't instantaneous, a now, we today. did it be

Operator

Citi. Thank with from you. proceed And our of line Please final question for William today the of Katz question. comes your

Renee Marthaler

speaking Marthaler Katz. actually This of behalf is Hi, William everyone. Renee on

color initial some Like more flows? just color kind on we appreciate of So any metrics client July. and engagement on

Paul Shoukry

assets our tailwind across Yes, recruiting are In markets outlook remains us business, terms said Private in the a the quarter management fourth Client pretty good. his of activity healthy. and provide the going question. engagement a capital for broad client comments into in entering group in pipeline It's as should Paul the remains businesses, the revenues to M&A fee-based asset looks one segment,

revenues through said, a be assuming expect hard quarter. Paul fixed depository activity, here We the the up, And client relatively in remains resilient income M&a the segment, the particular, the market to rest to record, that of repeat engaged. well, environment remains very as

details about activity provide we'll here. feel the good we So we as more but along go client levels,

Paul Reilly

on extraneous all Then remotely. participating. all I else hard, thank many so your just and working you are know like it would jobs given I market everything and depend and factors for to

know So as all Analyst color you for us, We'll Day harder an hopefully it's the I and really much we scheduled provide try but get appreciate time. as can. we as of taking as can soon to we

we so. color so a or get more just little month to And next

us. much very you for joining thank So

Operator

participation. good that lines. everyone. And please of today’s thank presentation. Have We And a do your your for day the conclude does ask you disconnect that you rest

Raymond James Financial (RJF) 31 Jul 202020 Q3 Earnings call transcript